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Turkish annual GDP growth slows to 1.6 percent

Turkey’s annual economic growth slowed to 1.6 percent in the third quarter, the lowest level since a failed military coup in July 2016, after the lira slumped and inflation soared.

The expansion eased from a revised 5.3 percent in the previous three-month period, the Ankara-based Turkish Statistical Institute said on Monday. Economists had forecast a growth rate of 2 percent in a Reuters poll.

Turkish economic activity has slumped in the second half of the year following a currency crisis that peaked in August. Early in 2018, economists had warned that government tax cuts and investment incentives threatened to overheat the economy. A political crisis with the United States over the internment of a U.S. pastor this summer had intensified concern, pushing the lira to record lows.

Third quarter GDP shrank 1.1 percent from the previous three months on a seasonally and calendar-adjusted basis, reducing the size of the economy to $833 billion, according to the figures. Two straight quarters of contraction, which are now likely, would mean the economy is officially in recession.

Inflation in Turkey stands at 22.6 percent, the highest level in major emerging markets after crisis-hit Argentina, which is now following an International Monetary Fund rescue programme.

The lira rose 0.3 percent to 5.288 per dollar at midday in Istanbul. The currency has lost almost one third of its value this year. It had hit a record low of 7.22 against the U.S. currency in mid-August.

A combination of a weak lira and high inflation, which has brought a slump in demand for imports and pushed up interest rates to the highest levels in 15 years, has prompted ratings agency Moody’s and the Organisation for Economic Cooperation and Development (OECD) to predict economic contraction for 2019.